Many factors are

considered when applying

for a mortgage loan with
the priority being the
monthly payment amount.
Several aspects
contribute to payment
amounts.
Interest rates can play a
significant role in
determining not just the
payment but also the
price you’ll pay over the
life of the loan.
Here are some areas that
can determine rates.
Have you ever
wondered what affects
the interest rates that
banks charge? If so,
you’re not alone.
Two levels determine
interest rates. For the
sake of this article, we’ll
call them internal and
external factors.
These different items
influence most banks
and financial
institutions
everywhere.
 Supply and Demand

Mortgage rates, like most

consumer products, are
affected by supply and
demand.
When the economy is
good, and people are
buying homes, lenders
charge higher prices.
When the economy is
slow, and homes aren’t
selling, banks lower the
rates to reel in customers.
 The Fed

The Federal Reserve

Board affects interest
rates as a method of
controlling economic
growth.
If the Fed is trying to curb
inflation, they raise the
prime rate, which slows
down the economy and
results in higher prices.
When the Fed wants to
motivate the economy,
they lower their
standards, which leads to
banks charging lower
amounts.
 Bonds

Government-issued
bonds can affect
mortgage rates as well.
Mortgage securities and
bonds are in competition
for similar investors, so
how well the bonds do
can change how much
interest lenders want to
charge customers.
Banks lend money to
make more money,
and they make their
money using the
interest they're able to
collect.
There are internal
aspects that, while they
affect interest rates,
apply only to you.
 Credit Worthiness

Good credit scores and

a regular income are
probably what matters
most when applying for
a loan.
Generally, the higher
your credit scores, the
lower the interest rates
you’ll be offered.
 Loan Type

Interest rates can be

affected by if whether
the mortgage is a fixed-
rate or an adjustable-
rate mortgage.
 Price of Home

Mortgage loans for

small or large
amounts may come
with slightly higher
interest rates.
 Location

Interest rates may

vary from state to
state.
 Loan Term

Loans for shorter terms

generally have lower
interest rates.
 Down Payment

The more extensive the

down payment, the
lower the interest rates
are going to be.
Many homeowners don’t
realize that the interest
makes up a large part of their
monthly mortgage payment.
Say a couple borrows
$100,000 on a ten-year
mortgage.
When anticipating their pay
their payment amount, they
often assume $100,000/120
months = $833.
If they weren’t charged
interest, that payment
amount would be correct.
The bank is charging 3%
interest, and it's charged on
a monthly basis.
When you take 3% or
.03 and divide it by 12,
you get .0025.
When you multiply
$100,000 by that, you
get $250, which is the
amount of the interest
payment.
Add the $250 to the
$833, and you have an
approximate amount for
the monthly loan
payment.
Taxes, insurance, and
PMI if needed, are
added to that amount.
Although some
circumstances affecting
overall interest rates are
beyond your control,
many aspects can be
controlled by the
borrower.
If you have good credit,
steady employment and
are financially
responsible, you've won
half the battle.
Taking advantage of the
opportunity to obtain a
free credit report can be
beneficial.
Doing your research on
current financial trends
can also keep you aware
of the housing market
trends.
Jimmy Vercellino, an experienced
professional with mortgage
lender First Choice Loan Services,
works hard to provide a
personalized home loan process
for you.
Options include FHA and VAloans,
fixed / adjustable rate mortgages,
Jumbo loans and more.